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Swedish East Asia Co. Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 407 of 1975
Judge
Reported in[1982]133ITR407(Cal)
ActsCompanies (Profits) Surtax Act, 1964 - Section 2(9); ;Income Tax Act, 1961 - Section 2(17)
AppellantSwedish East Asia Co. Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateKalyan Roy and ;R.N. Datta, Advs.
Respondent AdvocateS.C. Sen and ;S. Banerjee, Advs.
Cases ReferredBengal Immunity Co. Ltd. v. State of Bihar
Excerpt:
- .....emphasised that the definition provided by the i.t. act, 1961, was only for the purpose of that act and the i.t. act was a special act and, therefore, the definition therein could not he extended to cover a company which was not otherwise a company.6. in this connection, he drew our attention of the observations of the supreme court in the case of bengal immunity co. ltd. v. state of bihar : [1955]2scr603 , that when a special definition was provided for a special statute that definition could not be extended to cover other situations. but, in this case, no doubt, section 2(9) of the surtax act as well as the general principles have said how companies were understood in general parlance. in our opinion, the tribunal came to a correct conclusion and the question referred to us.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:

'Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 2(9) of the Companies (Profits) Surtax Act, 1964, the Tribunal was correct in holding that the assessee was a company liable to be assessed to tax on its profits under the provisions of the said Act?'

2. The assessee is a non-resident shipping company incorporated in Sweden. For the assessment years 1965-66 and 1966-67, the ITO had assessed the assessee-company on its profits under the Surtax Act. In appeals before the AAC, the validity of the assessments was challenged on the only ground that the provisions of the Surtax Act, 1964, had no application to non-resident companies, of which the assessee-company was one. The AAC disposed of both the appeals by his consolidated order. He held that the assessee-company was a company within the meaning of the I.T. Act, 1961, and that by force of Section 2(9) of the C. (P.) S. T. Act, 1964, the provisions of the I.T. Act applied to an assessee which was a company within the meaning of the I.T. Act. He further held that the above inference was reinforced by the provisions of Clauses 1(x) and 2(ii) of the First Schedule to the Surtax Act.

3. Being aggrieved by the decision of the AAC, the assessee-company preferred further appeals before the Tribunal. Before the Tribunal, it was contended, inter alia, that the 'Agreement for Avoidance of Double Taxation between India and Sweden' did not provide for the levy of surtax under the Surtax Act upon a Swedish company on its profits attributable to its operations carried on in India and that in the absence of such a provision in the said agreement no surtax could be levied under the C. (P.) S. T. Act, 1964, upon a Swedish company. For the reasons mentioned in its order, the Tribunal rejected this contention. This contention was not pressed before us either.

4. The other ground urged before the Tribunal was that the assessee was not a company within the meaning of the charging section of the C. (P.) S.T. Act, 1964. The Tribunal was, however, unable to accept this contention. The Tribunal observed in its order as follows :

'The more important ground urged before the Appellate Assistant Commissioner and reiterated before us is that the assessee is not a company within the meaning of the charging section of the Surtax Act and, hence, the levy of surtax under that Act upon the assessee is illegal. Learned counsel for the assessee has argued before us that the Surtax Act contains no definition of company, that the provisions of the Companies Act, 1956 have no application to and do not govern non-resident companies and, therefore, the provisions of the Surtax Act cannot be made applicable to the assessee, a non-resident company. Learned counsel has further submitted that just as the Surtax Act now provides for the levy of a special tax called surtax on the profits of a company, so also formerly the Excess Profits Tax Act, 1940, and the Business Profits Tax Act, 1947, provided for the levy of a special tax on the profits of a company, that each of the later two Acts contained the definition of company (section 2(8) of the Excess Profits Tax Act, 1940, and Section 2(5) of the Business Profits Tax Act, 1947), even though the Indian Income-tax Act, 1922, then in force contained an analogous definition of company and from this we have to draw the inference that the Legislature intended that the definition of company contained in the Act providing for the levy of income-tax should not govern the interpretation of the word 'company' used in enactments providing for the levy of special tax on the profits of a company, and, therefore, the assessee-company cannot be regarded as a company within the meaning of the Surtax Act merely because it is a company as defined in the Income-tax Act and is assessed to income-tax under the latter Act. The last limb of the argument of the learned counsel is that the assessee might be a company for purposes of the Income-tax Act by virtue of a declaration made by a general or special order of the Central Board of Revenue under Section 2(17) of the Income-tax Act, 1961, or Section 2(5A) of the Indian Income-tax Act, 1922, and that by force of the residuary provision, Section 2(9) of the Surtax Act, only the definition of company as given in the Income-tax Act must be deemed to have been incorporated into the Surtax Act but not any general or special order made by the Board of Revenue in exercise of the power of subordinate legislation delegated to it by the Legislature under the statutory provision defining company.

We have given due consideration to the above submissions of the learned counsel, but we are unable to agree with the contention that a non-resident company is not a company within the meaning of the Surtax Act. From the fact that the Surtax Act contains no definition of company, it does not follow that the said Act has no application to non-resident companies. If it is accepted that Section 2(9) of the Surtax Act does not have the effect of making the definition of company as given in the Income-tax Act applicable to the provisions of the former Act, then according to the principles of interpretation of statutes the expression 'company' occurring in the charging section and other provisions of the Surtax Act must be understood in the sense in which it is understood in common parlance and also legal parlance and takes in all incorporated companies, no matter whether they were incorporated in our country or in a foreign country. The word 'company' is understood by a layman as meaning any incorporated association of persons, resident as well as non-resident. The contention that the definition of company in the Income-tax Act does not govern interpretation of that expression occurring in the charging section of the Surtax Act does not, therefore, help the assessee, for, in that case, that expression has to be understood according to the common parlance, and in common parlance the word 'company' does not necessarily mean only resident company.

Clause (9) of Section 2 of the Surtax Act provides that all other words and expressions not defined in the preceding clauses of that section but used in the Act shall have the meaning: respectively assigned to them in the Income-tax Act. By force of this residuary provision the expression 'company' occurring in the charging section and other sections of the Surtax Act shall have the same meaning as the definition of company ' in the Income-tax Act. As observed by the learned departmental representative, the definition of 'company' in section 2(17) of the Income-tax Act, 1961, consists of three parts. Any Indian company comes under the first part. Any association, whether incorporated or not, whether Indian or non-Indian, which is or was assessable or was assessed to tax under the Indian Income-tax Act, 1922, as a company for the assessment year commencing on the 1st day of April, 1947, comes under the second part. Any association, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company for the purpose of the Income-tax. Act, comes under the third part. The definition of ' company ' in Section 2(5A) of the Indian Income-tax Act, 1922, also can be split up into three such identical parts. Now, if the assessee-company falls only under the aforementioned third part of the definition, there may be some scope for the doubt whether a company which is declare, by a general or special order of the Central Board of Revenue to be a company for the purposes of the income-tax ipso facto becomes a company within the meaning of the Surtax Act by force of Section 2(9) of the latter Act. In that case, there may be scope for the argument that the assesses became a company for the purpose of the Income-tax Act not by virtue of the meaning assigned to the word 'company ' in the Income-tax Act itself but by virtue of a general or special order passed by the executive in exercise of the power of subordinate legislation delegated to it and, therefore, Clause (9) of section, 2 of the Surtax Act has no application. But in the present case it is not shown that the assessee has become a company for the purposes of the Income-tax Act by a general or special order of the Central Board of Revenue. The assessee's counsel has placed before us a copy of the assessment order under Section 23(4) of, the Indian Income-tax Act, 1922, under which the assessee-company was assessed to tax for the assessment year 1947-48. From this it is reasonable to presume that the assessee is a company falling within the purview of the second part of the definition of 'company ' in the Income-tax Act. When the assessee is a company by virtue of the meaning assigned to the expression 'company ' in the Income-tax Act, by force of Clause (9) of Section 2 of the Surtax Act, the assessee must be deemed to be a company for purposes of the Surtax Act also.'

5. We are of the opinion that the Tribunal was right in its conclusion. In our view, the expression 'company' as understood in ordinary parlance and also in legal parlance takes in all incorporated companies. And, furthermore, in view of Section 2(9) of the Surtax Act, 1964, inasmuch as the expression 'company' is not defined and as the assessee was a company assessed under the I.T. Act, 1961, it would come within the purview of this Act. Learned advocate for the assessee drew our attention to the definition section in the I.T. Act, 1961, which started by saying 'For the purpose of this Act, unless the context otherwise indicated....' He, therefore, emphasised that the definition provided by the I.T. Act, 1961, was only for the purpose of that Act and the I.T. Act was a special Act and, therefore, the definition therein could not he extended to cover a company which was not otherwise a company.

6. In this connection, he drew our attention of the observations of the Supreme Court in the case of Bengal Immunity Co. Ltd. v. State of Bihar : [1955]2SCR603 , that when a special definition was provided for a special statute that definition could not be extended to cover other situations. But, in this case, no doubt, Section 2(9) of the Surtax Act as well as the general principles have said how companies were understood in general parlance. In our opinion, the Tribunal came to a correct conclusion and the question referred to us must, therefore, be answered in the affirmative and in favour of the revenue.

7. In the facts and circumstances of the case parties will pay and bear their own costs.

Sudhindra Mohan Guha, J.

8. I agree.


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